China Archives | Page 25 of 28

China exports surge even as consumer demand weakens

May 30, 2022 | China, Supply Chain

Container volumes at eight of China’s top ports surged 25% to 16.8 million TEU in April, largely driven by consumers in Europe and the US, but manufacturers are anticipating weakening demand.

According to figures released by China’s Transport Ministry, only Shanghai recorded a decline in sea freight throughput in April, the first full month of the city-wide lockdown that has closed factories and slashed trucking capability and capacity, due to government restrictions in the movement of its Citizens.

Transport Ministry figures show month-on-month volumes at Shanghai fell 19% in April to 3.1 million TEU from 3.8 million TEU in March, while other ports, including Tianjin (+48%) Shenzhen (+43%), Guangzhou (+35%), Ningbo (+32%) and Qingdao (+31%) experienced double-digit increases.

Ningbo’s 32% increase in volumes, to more than 3 million TEU in April, was massively boosted as shippers diverted cargo, to avoid the disrupted trucking and port operations in Shanghai.

With Shanghai starting to ease lockdown restrictions carriers are reporting improving logistics and supply chain performance, with Maersk resuming operations at 25% of warehouses, including facilities in Pudong, the area closest to the main port areas at Yangshan and Waigaoqiao.

Despite the massive volumes moving through China’s ports, manufacturers are bracing for more pain as rising interest rates and inflation combine to increase prices and dampen US and European shoppers’ enthusiasm for goods, with many already shifting towards buying services than goods.

Some manufacturers are reporting that while overall demand remains robust, orders for delivery in the final quarter look weaker, with buyers becoming very tentative in restocking and ordering.

While some of the spending shift reflects a return to normal buying habits, some of it also reflects rising inflation and interest rates, fading government stimuli and volatile financial markets.

The slowdown isn’t a trade recession because underlying demand remains solid and consumers do have money to spend, but the downshift is notable and the WTO lowered its projection for growth in merchandise trade this year to 3%, down from its previous projection of 4.7%, while Asia’s manufacturing sector contracted in April for the first time since June 2020.

Evidence from South Korea, often seen as a bellwether for international trade, is showing an enduring slowdown in exports, with shipments from Taiwan also down and China’s lingering zero-COVID policy creating further hurdles.

While many financial indicators may point to risks in the global economy, amid recession warnings, we’re not there yet and any slowdown will enable global supply chains to shake off any lingering ‘performance’ issues, which in turn will ensure that the recovery, when it comes, will be super-charged by cost-effective and efficient global freight infrastructure.

Whatever challenges your supply chain may face, the long term fixed price and capacity agreements we have in place with our partner carriers mean that we are well positioned to continue to deliver resilient, consistent and reliable supply chain movements.

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.

Demand for Shanghai sea exports may divert to air freight

May 30, 2022 | Air, China, Sea, Supply Chain

As COVID lockdown measures are gradually relaxed in Shanghai it is uncertain how quickly export sea freight volumes will rebound, but many experts are anticipating a strong and sustained spike in demand creating a backlog of shipping containers, which could once again result in ocean shipments diverting and putting pressure on air freight, which is already experiencing reduced availability due to the lack of passenger aircraft, restricted movement through Russian airspace and carriers not finding the long haul route economically viable.

Shanghai port - the world’s largest container port - has remained open while the city’s lockdowns have disrupted manufacturing, trucking and freight operations for the past two months and the strength of the city’s manufacturing output recovery will determine if freight rates, which have stagnated, will increase sharply as peak season approaches.

While some believe that factories will recommence manufacturing steadily over coming months and ocean container shipping will resume the seasonal ups and downs we’ve been accustomed to before COVID-19, others point to the tremendous amount of cargo that is already awaiting shipment, estimated at 260k TEU, which combined with pent-up demand, can only result in a surge of pressure on container movements from the region.

The port is basically bursting with containers, and if not cleared or substantially reduced, there may be little room for export loading movements to occur as smoothly as they normally do, which in turn could pile on the pressure at Shanghai Pudong (PVG) airport.

Vessel traffic around the port is increasing with currently more than 3% of the global container fleet capacity stuck there and wider congestion is still having a profound impact, with serious congestion in both American and European ports causing sailings to return to Asia late, resulting in additional delays and blank sailings.

Meanwhile the huge backlog of containers at Shanghai grows, with no capacity to shift it and when you have all this capacity constraint and demand on the ocean freight side, cargo will simply begin diverting to air freight, to recover failures and delays in the supply chain.

Importers who need their products to meet market demand, or to use in production, will use air to get those products as quickly as possible and that will also have an influence on capacity, which is more scarce today than it was two years ago. We know this as distressed sea freight and add this to the planned air freight for higher value products, with peak season due at the end of Q3, then there is likely to be a spike once production flows are recovered in the factories.

This could contribute to already elevated air freight rates, which have remained elevated due to the lack of capacity that followed airspace restrictions and the Shanghai lockdown.

Shanghai is loosening lockdown restrictions now, with the normal manufacturing and logistics environment likely to return in June and when it happens, we expect to see a surge in air freight volumes as shippers expedite products, that are needed on shelves the UK, Europe and the US.

We will continue to closely monitor the situation and update you as changes occur, but we do recommend checking with your vendors, to clarify the status of your orders.

We hope to see supply chains start to flow freely again quickly, as the pent-up demand for delayed goods could quickly create congestion, if operations are not running optimally.

We expect demand for space and spot/ FAK rates to increase very quickly and would suggest you start talking to us now about your potential requirements, so we can put appropriate plans in place.

To discuss how we support and protect your supply chain, please contact Elliot Carlile.

Foreign workers leave China and it is likely to continue as China ‘reshapes’ commerce

May 19, 2022 | China, Supply Chain

Strict border controls amid China’s zero-COVID policy is creating a shortage of foreign expertise, with some suggesting the development could become a permanent feature, with ramifications for supply chains and an accelerating factor for consideration of production moving to alternative origins.

China’s foreign national population has plummeted during the COVID pandemic, with hundreds of thousands of expats returning home since 2020 and many have never returned, with more leaving in an exodus since the lockdowns in China were implemented. It is also widely reported in the international press that more non-domiciles will be exiting China and Hong Kong in the near future.

Nearly two years after China introduced a virtual ban on foreign nationals entering, border restrictions remain extremely tight, with work permits requiring an invitation letter from the Chinese government.

Large numbers of expats are effectively stranded outside China, with as many as 100,000 waiting for permission to return to Shanghai alone. It’s unclear exactly how many foreigners remain in China, though a 2020 census estimated there were around 850,000 overseas nationals living on the mainland and websites serving China’s foreign community have experienced steep drops in traffic since 2019.

The expat shortage is causing businesses serious headaches, because foreign staff often have skills and established networks in overseas markets that are hard to replace.

In some sectors, companies have begun offering massive wages to attract international talent. In others, hiring from overseas has become so difficult, many firms have simply given up. Or rely totally on on-line connectivity – this effects all parties involved both within China and overseas.

And the situation could potentially get worse, with The Loadstar reporting that a survey by the German Chamber of Commerce in China shows nearly one-third of foreign employees plan to leave permanently, with 10% aiming to do so before their current employment contract ends.

With many Shanghai expats still unable to leave their apartment building or gain access to basic necessities, Chinese employers are bracing for a mass retreat of foreign talent this summer.

The owner of a rail components manufacturing firm in Northeast China said he had dealt with all sorts of supply problems, but never expected that a shortage of foreign workers would be one of them.

That, however, is exactly what he’s facing two years into the pandemic, as one by one, he lost all of the overseas executives who used to work under him and he says the impact has been devastating, but local hires lack the international experience the firm needs and recruiting foreign professionals has become impossible.

The owners comments are supported by the German Chamber’s survey, which shows businesses allowed to resume production under lockdown are operating at 46% of their total production capacity.

Furthermore, respondents said their company’s production capacity was hampered by lack of logistics availability (69%), missing raw materials and pre-products (69%), missing transport permits (56%), additional workers cannot leave their compound (56%) or their districts (43%) and uncertainty due to rapidly changing policies (41%).

Pressure from international clients is increasing as trust in Chinese supply chains is decreasing. Supply chains can’t be changed overnight, but they can with time, and the longer the disruptions in China last without any signs of improvement, the more supply chains will be transferred to other countries outside of China.

Metro are constantly reviewing the situation and we have both local colleagues ‘on the ground’ and international teams. We have it covered with our approach and up-to-date market intel and will continue to encourage international travel and the movement of stakeholders involved in our clients business requirements, globally.

Shanghai to return to normal in June? Let’s hope so…

May 19, 2022 | Air, China, Sea, Supply Chain

Shanghai is aiming to reopen the city and business operations, with normal life resuming from the 1st June, as all 16 city districts report acceptably reduced ‘zero-COVID’ cases.

At a press briefing on Monday, Shanghai’s Vice Mayor announced that 15 of Shanghai’s 16 districts had recorded no new COVID-19 infections for two consecutive days, with all of the city’s 16 districts achieving zero-COVID the following day.

The news comes as the city’s case count fell under 1,000 for the first time in over a month, with the vice mayor announcing a three-phase plan for reopening, which aims to return to normal business operations by mid to late June.

Supermarkets, convenience stores and pharmacies have opened, but movement curbs will largely remain in place until 21st May, to prevent a rebound in infections, with efforts to restore normal production and life in the city from the 1st June.

The number of trains serving Shanghai and domestic flights are increasing and from the 22nd May bus and rail services will gradually resume normal operations, but passengers will need to show a negative COVID test.

At the end of April reports suggested that 20% of the global containership fleet was caught in congestion outside ports, with more than a quarter waiting to get into Shanghai, leading to fears of a cargo ‘tsunami’ when the port reopens and pent-up container flows are finally released.

Increasing numbers of factories are operating under “closed loop production“ and most warehouses are open (though operating with reduced capacity) while - critically - more trucking is available, which means more cargo is able to be shipped from Shanghai.

While other cities implement varied COVID control policies, cargo collection and deliveries is still facing challenges and heavy cost, so please check with us on a case by case basis, for the best solutions.

Flights serving Pudong (PVG) airport are resuming and are gradually increasing, but passenger flight policy has not changed, Chinese airlines are still re-routed to other airports, while foreign airlines are either ordered to suspend and cancel or reduce seating rate to 40%.

China's severe zero-COVID restrictions are increasingly out of step with the rest of the world, which has been lifting restrictions even as infections spread, and are sending shockwaves through global supply chains.

China’s industrial output fell 2.9% in April from a year earlier, down sharply from a 5.0% increase in March and while economic activity has been improving in May, the strength of any rebound is uncertain due to China’s uncompromising “zero Covid” policy and the scale of future Covid outbreaks and lockdowns.

Beijing has been finding new cases almost every day, in an indication of how difficult it is to tackle the transmissible Omicron variant and while the capital has not enforced a city-wide lockdown it has extended guidance to work from home in four districts, banned dine-in service at restaurants and curtailed public transport.

We are working closely with our local partners to follow the evolving situation in Shanghai and Beijing and will continue to share any important developments.

With Shanghai’s lockdown lifting we anticipate the manufacturing bounce-back happening swiftly and we recommend checking the status of your orders with your vendors, to clarify when they will be manufactured and available for despatch.

We expect demand for space and spot/ FAK rates to increase very quickly and would suggest you start talking to us now about your potential requirements, so we can put appropriate plans in place.

With the long term fixed price and capacity agreements we have in place with our partner carriers we are well positioned to continue to deliver resilient, consistent and reliable supply chain movements as China recovers.

Our cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.